Liquidations down to lowest level in years despite load-shedding

Company liquidations showed a surprising drop in January, despite an uptick of cases in December, and are now at the lowest level in years.

According to StatsSA, liquidations dropped to 81 cases in January 2023 – a 32.1% decrease from December 2022.

The lowest number of liquidation cases – zero – was recorded by StatsSA in April 2020, when the Companies and Intellectual Property Commission had to close due to the Covid-19 lockdown.

The last time liquidations were as low as in January 2023 was in January 2017, when only 91 cases were reported.

Most of the companies that were liquidated in January were in the financing, insurance, real estate, and business services. These industries contributed towards 30 of the 81 cases recorded that month.

Seven of the liquidations reported in January were compulsory liquidations, and 74 were voluntary.

Just a year ago, there were 120 cases in January 2022. In December, there were 159 liquidations. 

Liquidation cases had been rising throughout 2022, hitting their peak in December. In 2022, 1,907 businesses and companies were liquidated.

While this is not as high as the number of liquidation cases recorded during the COVID-19 pandemic, this drop in January 2023 came as a surprise, Absa said in a recent statement.

“The benign January liquidations data have surprised us, given widespread anecdotal reports that small and medium businesses are shutting down mainly due to the intense load shedding,” it said.

This drop could mean that businesses are more resilient than expected.

However, Absa pointed out that liquidations are a lagging indicator, which could rise again in the coming months.

Alternatively, January could have been a moderation from the recent upward trend of company liquidations, which, since increasing, peaked in December 2022.

“The February print will shed more light on whether businesses are more resilient than expected or [whether] January was a moderation from the recent upward trend.”

SOURCE: StatsSA/Absa Research


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